All posts by Rich Bergsund

I’ve received several calls and emails today about a blog post full of false information about Wine.com. I’d normally ignore something like this and get on with my day, but my team has worked too hard building Wine.com to not respond.

Is Wine.com for sale?We’re majority owned by a private equity fund that makes money by buying and selling companies. So we’re basically always for sale and that has always been the case. Beyond that, we never comment on specific M&A or funding activity because that’s private business.

Is Wine.com struggling?There’s no question wine is a challenging category online, due to regulatory constraints, shipping heavy glass bottles, extreme weather concerns and adult signatures required for delivery. So the answer to this question has three parts:

Part 1 – pre turnaroundThis company was founded as eVineyard.com in 1998 by Mike Osborn, who runs our Merchandising to this day, and has developed deep, trusting relationships with our hundreds of suppliers and wholesalers.

There was a lot of failed investment activity in online wine in the late 1990’s (see timeline below), but eVineyard was on the sidelines in Portland, going slower, trying to figure out the right business model. When the original Wine.com combined with Virtual Vineyards and WineShopper, then all went out of business in 2001, eVineyard bought the Wine.com and WineShopper names.

Yesterday’s blog post provided quotes from people running the company from 2002 to fall of 2005 (the blogger from Growth Capitalist didn’t call me, by the way). As of fall 2005, the company was losing $15M of EBITDA on $35 million in revenue, and had a break-even point of over $200 million in revenue.

So yes, you bet Wine.com was struggling.

Part 2 – turnaroundI joined Mike and his team in 2006 because I saw a category that consumers wanted to buy online, healthy customer and supplier relations and a great team that had been mismanaged. We got to work on our cost structure, reducing our break-even point from over $200 million in revenue to $45 million. Then we went to work on our customer experience – adding to our wine assortment, improving our pricing & value, making delivery more convenient and reliable, and adding tools and content to give customers confidence in their wine buying decisions. In fall of 2007 we took in our last round of external financing, $5 million, and have been self-sufficient ever since.

Despite the recession, we turned cash flow positive in 2009 and EBITDA positive in 2010 on $45 million in revenue. We closed our fiscal year in March 2011 with $1.9 million in cash flow on revenue of $56 million.

Turnaround complete – Wine.com no longer struggling.

Part 3 – growthNow the fun part. We decided (with our board) to re-invest all cash generated from internal operations into laying the foundation for future growth. Wine is underpenetrated online, and it’s a $35 billion category in the US. What investments could we make in our customer experience that would create greater loyalty and growth?

Customers responded. Over the last four years, website traffic grew 2.4 times to over 15.6 million visits. Bottles sold and shipped nearly doubled to 2.7 million. Lifetime customer value grew 50%. And revenue grew 70% to $75 million. All while inventory turns increased to 12 times and net fulfillment cost per order dropped by 75%.

If Wine.com is doing fine, what’s up with this blog post?You’ve got me. The blogger didn’t contact me to check her facts, and only seems to have spoken with a couple unhappy people who I don’t even know who worked here nearly a decade ago. All I can say is the Wine.com team has moved on from whatever drama occurred under their watch. And we’re excited to continue to innovate, wow our customers and partner with our suppliers for many years to come.